US Stocks Climb As Housing Data, Citigroup Provide Boost

DonnaKardos

NEW YORK (MarketWatch) -- U.S. stocks rose Monday following a key housing-market measure's first improvement in five months and stronger-than-expected earnings from Citigroup.

The Dow Jones Industrial Average climbed 44 points, or 0.4%, to 11107. The Nasdaq Composite added 0.1% to 2471 while the Standard & Poor's 500 index advanced 0.2% to 1179.

The financial sector led the climb, boosted by a 3.5% increase in Citigroup. The bank's third-quarter earnings soared, with per-share profit coming in just above analysts' estimates as the amount the company set aside for credit losses fell.

Citigroup's report kicked off the start of the first "peak" week of the third-quarter reporting season on a positive note. This week, 11 of the 30 Dow Jones Industrial Average components and more than one-fifth of S&P 500 companies are due to report.

Also lifting sentiment, the National Association of Home Builders said its housing market index rose three points to 16 in October, the first improvement in the index in five months. The index measures builder confidence for sales prospects of new, single-family homes.

The measure's October increase shows "the new-homes market is finally moving past the lull that occurred when the home buyer tax credits expired and economic growth stalled this summer," NAHB chief economist David Crowe said in a statement.

The NAHB report boosted expectations for other key housing-market data due Tuesday on housing starts and building permits.

"Sentiment is clearly better," said Jeff Markunas, portfolio manager of the RidgeWorth Large Cap Core Equity Fund. "We've still got a very slow recovery with a lot of headwinds, but people are feeling better about it because they've gotten a few data points that have gotten them out of this double-dip thing."

Still, an important question for the market's direction is "whether the data points will continue to improve at a pace to satisfy investors," Markunas said. "The natural impatience of the market will continue to be challenged with the slowness of the recovery."

Not all of Monday's economic data topped expectations. Investors were disappointed by a weak reading of U.S. industrial production, which slipped 0.2% in September, reflecting a slowdown in what was a primary driver of growth out of the recession. Capacity utilization also declined.

The dollar strengthened for a second-straight day--with the U.S. Dollar Index, tracking the U.S. currency against a basket of six others, up 0.1%--as traders shied away from bets that further easing by the Federal Reserve would continue to punish the U.S. currency.

The dollar has weakened in recent weeks while stocks have rallied on expectations for the Fed to move to prop up the economy. However, investors are now growing doubtful over how much longer the dollar can slump and stocks can climb on that expectation.

Treasurys also climbed, pushing the yield on the 10-year note down to 2.52%. Crude-oil futures edged higher while gold futures slipped.

In deal activity, St. Jude Medical agreed to acquire AGA Medical in a cash-and-stock deal valued at about $1.08 billion. St. Jude said the acquisition is "highly complementary" to the medical-device maker's heart and vascular business and will allow it to extend its product reach into new areas. The deal values AGA at a 41% premium to Friday's closing price and includes the assumption of about $225 million in AGA's debt. AGA shares surged 41% while St. Jude rose 0.5%.

Northeast Utilities agreed to buy fellow New England utility company Nstar for $4.3 billion in stock, forming what the two companies said will be one of the country's biggest utilities. The terms value Nstar at a 1.9% premium to Friday's closing price. Northeast added 0.3% while Nstar climbed 2.2%.

Among other stocks in focus, Halliburton fell 5.2%. The oilfield-services company's third-quarter profit doubled as its North American markets continued to rebound, but the earnings missed analysts' expectations.

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